¶ … U.S. economic downturn has made many states in the United States to implement strategies to boost economic developments of their respective states using different economic incentives to attract investors. Recognizing the needs to be competitive nationally and globally, New Jersey legislative house has sponsored the "New Jersey Economic Opportunity Act II of 2013" with the aim of fostering an economic development in the state. The goal of Economic Opportunity Act is to improve the panoply of economic incentives to encourage companies in the United States and outside the United States to invest in the state to boost employment opportunities and revenues of the state.
Several states in the United States have also implemented similar programs to enhance economic growth. Example of these states includes Wisconsin, North Carolina, Missouri and Mississippi. Missouri used the BUILD (Business Use Incentives for Large-scale Development) to stimulate 1,410 permanent jobs in 2011 fiscal year. Few years after the introduction of the program, the company such as IBM and Express Scripts implemented business plan to create more jobs in the states to derive benefits from the incentives.
Moreover, the program attempts to strengthening job creations as well as enhancing New Jersey's competitive advantages in the global economy. Under the program, the New Jersey introduces Grow NJ (Grow New Jersey Assistance Program) and ERG (Economic Redevelopment and Growth Program. The goal of Grow NJ is to stimulate job opportunities by using tax incentive program. 1 Additionally, the Grow NJ is used to allocate base tax credits ranging between $500 and $5,000 to attract more companies into the states. The New Jersey will also use ERG to implement tax incentive program by allocating tax credits for residential projects to achieve the state's developmental goals.
Thus, both Grow NJ and ERG are to stimulate jobs and enhance economic growth. However, New Jersey may still face constraints with the program's implementation because the state may face criticisms from the public that public officials are using the state's funds for firms' growth.
Section I: Introduction & Methodology
Faced with harsh economic and high unemployment rates, many states introduced tax incentives to stimulate economic growths. Michigan introduced film tax incentives in 2008 to promote the film production in the state. Nearly 60% of tax credits was offered to film producing firms depending on the community the film was shot2. Since the program has been introduced in 2008, more than 100 films have been produced in the state. Some states also use property tax exemptions to enhance investment growth and create jobs. In 2009, Ohio launched the real personal or property tax incentives in exchange of capital investments. Since the programs have been introduced in 2009, Ohio has received projects that worth $440 million.3.
Some states also introduced a reduction of taxable income thereby reducing tax bills of participating entities. Many states attract businesses using sales tax exemption on the overhead costs thereby attracting business investments to their states. For example,
Missouri is currently offering varieties of economic tax incentives to induce economic growth and boosting employment opportunities in the state. 4. Missouri introduced BUILD (Business Use Incentives for Large-scale Development) to create 1,410 permanent jobs by 2011 fiscal year. Following the launching of BUILD, the IBM Service Center has committed to employ several hundred workers to meet the incentives offered by the state and receive the incentive packages. The employment records of IBM have increased at Columbia facility from 143 to 349. Moreover, the company hired new 800 technical personnel in 2012. 5.
Despite the convincing arguments presented by the literatures concerning the economic incentives to promote the economic growths of participating states, Chirink, & Wilson provide a contrasting argument by pointing out that some states do not enjoy economic benefits from the economic incentives6 . For example, Enterprise Zone Program launched in California to create employment opportunities for economically disadvantaged workers does not have impact on job creation. Hagen also argues that economic development incentive programs may not be cost effective for states because firms generally invest in states that have abundant skilled workforce, cheap suppliers and quality infrastructures. 7
Following the analysis of the literatures, the New Jersey could still record economic growth and boost employment opportunity with the Economic Opportunity Act. Analysis of the literatures has shown that economic incentive programs are cost-effective, which assist states to reach their goals. Missouri with its tax incentive program is able to increase the net tax revenues, new capital...
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